Ben Kelly, architect

New Order had visited all the happening clubs in New York with their manager, Rob Gretton, and they wanted one of their own. When the band's sleeve designer Peter Saville was shown the premises, a former yacht showroom, he was horrified at their scale. "I can't do this," he said, "but I know a man who can." The two of us had designed an Orchestral Manouevres in the Dark cover together and I'd also designed a fashion shop above his office. I'd never lived in Manchester, but I knew the Factory ethos.

As an architect, being given a massive blank canvas was a dream. The building had a rickety balcony and needed huge structural alterations; it was bound to cost more than they thought. But I'd visited Danceteria [the 1980s dance music mecca] in New York and could see the possibilities. Up until then, UK clubs had been of the Peter Stringfellow ilk with flocked wallpaper and a mirrorball, or just shithole basements painted black.

Everything Factory Records made got a catalogue number, so they issued one for this: FAC51. We cut a 5 and a 1 into the entrance doors and didn't bother having a neon sign: there was just a 12in granite plaque carved by someone who did gravestones. The idea was to create a sense of surprise and discovery: once past this tiny plaque, you'd emerge into a vast cathedral-like space with yellow-and-black-striped columns rising around the edge of the dancefloor. That was partly for safety – the floor was raised – but it gave the club the language of a real factory, where hazard lines warn of forklift trucks. It was great to see kids being so taken by surprise when they came in, being made to think about things like architecture. I remember two lads standing there with pint glasses saying: "Fookin' 'ell!"

In his infinite wisdom, Tony Wilson, [the Factory Records manager], got Bernard Manning in for the opening in 1982. He came on, looked around, and said: "I've played some shitholes in my time, but this beats the lot." His jokes didn't go down well and he returned his fee.

The sightlines were crap for live acts because of where Tony had wanted the stage sited, and I forgot to include any cloakrooms – which Tony loved, typically. But the venue would later prove perfect as an acid house mecca, earning it the nickname the Halluçienda. They had fashion shows, too, and Madonna's first performance on British TV was filmed at the Haçienda in 1983. We even had an inflatable swimming pool in there one night – and it burst. That's what was great about the club. It set up possibilities. Wherever I go in the world, people say it changed their life.

Peter Hook, co-owner

Joy Division had made a lot of money and arguments were raging over how to spend it. Tony and Rob wanted a club. They were dreamers who lived for the moment. When you have that mindset, you can do wonderful things. They told us it would cost £45,000 and if the band put up half we'd get our own nightclub – with free drinks. It ended up costing £450,000, a huge sum back then. Clubs in New York were dark, intense and mysterious. We got the exact opposite, but the architecture was wonderful.

The idea of having a video jockey in a booth playing film clips was ahead of its time, but the VJ, Claude Bessy, got us into all sorts of trouble. The Jewish Chronicle did a front-page story about Tony along the lines of "TV presenter shows Nazi propaganda in own club". But it wasn't him, it was Claude – and it was all done in a very punky way, commenting on events of the day.

The sound on stage was great but the same wasn't true elsewhere in the club, particularly under the glass roof. . We had some great gigs but it was practically empty for seven years. Then acid changed everything. Nobody bought beer because they were on E, but Rob thought it was demeaning to sell water so we kept losing money. Rob and Tony wanted Valhalla, heaven on earth, in the form of a social club where people like us could go every night. It was a valiant effort, but in the 1990s gangsters moved in to sell drugs and fought among themselves. When the licensing committee visited, someone got hit with a wheel-brace and the magistrate got covered in their blood. In the end, we just ran out of money: the club lost New Order and Factory £10m plus tax. It was a ridiculous folly. But as Rob said: "You can't buy history, Hooky."

• The Hacienda is recreated in British Design 1948-2012, at the V&A, London SW7, until 12 August. The Hacienda: How Not to Run a Club by Peter Hook is published by Simon & Schuster.